Synertec Corporation Ltd (ASX:SOP) has seen revenue and income growth of 44% in the last 12 months, according to its newly released key achievements and preliminary results for the 2022 financial year.
The diversified technology design and development growth company saw revenue and other income of A$12.1 million, which represents a 44% jump on the previous year.
This was bolstered by rapid growth in the company’s engineering consultancy services revenue, which generated A$8.8 million alone, an increase of 87% on FY21.
The trend of stronger gross margins also continued during 2022, up 4 percentage points on 2021.
Synertec made technology investments in line with expectations announced earlier in the year, though the timeframe for its flagship Powerhouse technology accelerated, with most of its development outlay condensed into the one year.
Tailwinds for Powerhouse
During the year, Synertec advanced the Powerhouse technology from concept to a commercial scale site-commissioned operating prototype.
Milestones for the technology achieved during the year include successfully passing extensive factory acceptance testing (FAT) and the completion of remote site construction, including connection of the battery housings and control system to the solar array and Santos’ SCADA system.
Field testing continues and is scheduled to wrap in the first half of this financial year.
Synertec and Santos also progressed from a Memorandum of Understanding (MoU) to an overarching Santos goods and services contract with a work order for the prototype.
The parties continue to work together towards commercial terms beyond the prototype on a case-by-case basis.
Following the success of the FAT and agreeing commercial terms for prototype, Synertec has started to explore the potential for Powerhouse to be more broadly applied in the USA given the market interest in this technology and recent legislative tailwinds.
Contract wins, extensions
Synertec enjoyed a number of contract wins and extensions with blue-chip customers including Melbourne Water and a A$3 million contract with Metro Trains Melbourne to deliver the control and monitoring system for the Metro Tunnel Project.
The company also garnered master service agreements with long-time customers CSL Limited (ASX:CSL), Pfizer and Aspen Pharmacare (JSE:APN) to provide project management, automation and design to support several of their critical pharma and advance manufacturing projects.
On the engineering services front, the company is in talks with various clients to:
- support of the development of a new green ammonia facility;
- respond to the need to increase gas supply within Victoria;
- develop solar power projects for major water utilities; and
- engineer a water utility treatment plant system upgrade.
Commenting on the year just gone, managing director Michael Carroll said: “The 2022 financial year saw the company make significant progress in developing our transition technology solutions, while further strengthening our foundations as an engineering service provider to tier one customers in large global markets.
“We are exceptionally pleased to see our proprietary Powerhouse system successfully complete factory testing and be mobilised to site where construction was safely and swiftly completed.
“The Powerhouse units are emerging as a reliable and commercial solution to substantially reduce the carbon footprint of remote industrial operations.
“The customers we engage through the engineering division are likely to be future consumers of our transition technology and the division remains a crucial part of our company’s development.
“With several of our technologies progressing towards commercialisation and the engineering business growing its workforce, work in hand and strategic bid activity, FY23 is set to be an exciting year for our company.”
Technology business update
During the year Synertec’s technology arm continued to progress its three environmentally friendly technology solutions to help global industry transition to a low carbon future and reduce its environmental footprint.
Synertec says it is committed to being an impact investment for shareholders and local communities, and to ensuring it is supporting its partners in the collective endeavour to improve ESG performance.
Financial highlights
Net cash at June 30, 2022, was A$4.1 million, while at the same time last year it was A$2.6 million.
The improvement in the company’s margins reflects an ongoing trend toward a higher proportion of revenues derived from consultancy services – generally higher margin than fixed-price contracts – across all four of the group’s target sectors of critical infrastructure, water, energy and advanced manufacturing.
Adjusted EBITDA (including R&D costs of A$2.6 million and R&D tax credits income of A$1.2 million) reflected a loss of A$2.7 million.
The company says this is due to the condensing of Powerhouse development outlay into the one financial year. The increase in R&D costs reflects the company’s substantial investments during FY22 in its technology business. These growth opportunities are currently being expensed for the benefit of R&D tax credits to be refunded in cash.
Synertec expects to receive around A$1.3 million in cash during the first half of FY23 relating to R&D tax credits and other tax rebates from government following lodgement and processing of its FY22 tax returns.